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7 Comments on California housing agency forcing foreclosures
Do you have a link to this article you could share?
Scott ... here is the link ... http://latimesblogs.latimes.com/money_co/2011/10/california-state-housing-agency-forcing-foreclosures.html
I found a similar article in the Sacramento Bee. These are happening to people who purchased using FHA loans which has a condition of owner occupancy tied into the loan. I think that is what this is all about.
I am of two minds on this ...
if people get the loan with the condition that it has to be owner occupied than it should be that and the foreclosure is fine
but ...
with everything else going on in the market, does this agency really have to foreclose on people that are current on their payments?
this does not seem to add a positive wibe to the current market
Lehel - FHA will allow FHA homeowners to rent out their home under certain conditions like a job transfer. However, if these homeowners got an FHA loan simply so they could put less down and have been renting out since day one, then that is mortgage fraud and they deserved to get what's coming to them. If you can't do the time then don't do the crime. JMHO
Lehel - After reading the article, I now understand the issue. California Housing Agency (CalHFA) operates under a state charter and their funds are contingent on adhering to these charter rules, regs and guidelines, which are independent of FHA guidelines.
So even though the homeowner may have an FHA first mortgage, their second mortgage is a CalHFA silent second loan. So even if FHA were to allow them to rent out their home in the case of a job transfer, if they are not in a financial hardship (which it's unlikely if they still have a job) then they would not be able to rent the home out and they would then need to sell the home.
However, according to the article, these folks are not eligible for an FHA exception (for job transfers) because these homeowners just chose to rent it out. Because the cost of ownership is low (because of the CalHFA silent second), the homeowner could actually rent it out for probably more than the cost of ownership and could actually earn an income from the property.
Once again, this is not allowed for either FHA or CalHFA and would be considered mortgage fraud.
Donna...you make a very good point...I do think there are parts of the story missing...but if the loan does not allow property to be rented than CalFHA has every right to foreclose...but should they?